Middle East upstream growth will continue despite the current oil price dip, and the region is technology hungry. Hugh Fraser, Managing Partner, Dubai, for law firm Andrews Kurth, explains.
The Middle East upstream market is growing, with all of the Gulf Cooperation Countries and Iraq endeavoring to increase their oil and gas production. There are two key drivers: the pressure on gas supplies due to demand for gas in the industrial sectors in the region and the desire of the regional governments to fund infrastructure and social projects, given the recent experiences with the “Arab Spring.”
All eyes are on Saudi Arabia because Saudi Aramco will be spending US$40 billion a year for the next 10 years on its oil and gas sector. Oman is also a target market for advanced technologies because of its specific challenges: many small wells, remote locations and difficult geology.
There may be some slowing up, because of the lower oil price, but in reality the costs of production in the region are some of the lowest in the world and it will be shale gas, heavy oil and deep water projects in other parts of the world which will suffer more from the lower oil price.
We see the future potential as positive because of the increasing need for advanced technology and know-how services in the region. Key issues are EOR, sour gas, heavy oil, tight/deep gas and possible deep water projects over the horizon in Red Sea.
The NOC operators, especially Saudi Aramco, are monitoring technology developments very closely. I think the main issue is the slowness of acceptance of new technologies, which are more rapidly deployed by operators in the West such as Statoil. There is still a reluctance to accept new technology options unless there is clear case that the returns will far outweigh the investment--and it is always difficult to make such a case with new technologies.
However, we do see changing attitudes about deploying new technologies at least to some extent by the more enlightened NOCs. Also, offshore operators in the Middle East will benefit greatly from the advances in technology developed for the North Sea and Gulf of Mexico, so any “gaps” can be filled fairly quickly with the right technology partners.
Andrews Kurth specializes in providing legal services to advanced technology and know-how companies mainly from the North Sea and Gulf of Mexico entering into or expanding within the Middle East.
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